Chattel mortgage for vehicles, machinery and equipment.

A balloon is a lump sum left to pay at the end of a chattel mortgage, which lowers the regular repayments during the term. For example, a 30 per cent balloon on a $100,000 vehicle leaves $30,000 to pay at the end, so the monthly amount is calculated on $70,000 plus interest on the full balance. Balloons are commonly set between 0 and 40 per cent depending on the asset and term, and at the end you can pay it out, refinance it or sell the asset to clear it. A balloon reduces monthly cost but increases total interest, so your broker shows both figures side by side.

With a chattel mortgage your business owns the asset, so if you are registered for GST you can generally claim the GST included in the purchase price on your next BAS, rather than spreading it over the term as you would with a lease. The interest portion of repayments and the depreciation of the asset are usually tax deductible for business use, and instant asset write-off rules may apply in some years. Tax outcomes depend on your structure and accounting method, so confirm the treatment with your accountant before you sign.

Yes. A chattel mortgage can be paid out early, and most lenders quote a payout figure on request. Because the interest is usually fixed, many lenders charge an early termination fee or recover part of the remaining interest, so paying out early does not always save the full amount you would expect. Some lenders reduce the fee in the later years of the term. Ask your broker to explain the payout terms of each lender before you choose, especially if you plan to upgrade the asset within a few years.

Yes, some lenders offer low-doc pathways. Low-doc does not mean no documents or automatic approval. The information required depends on your business, the amount and the lender. Your broker will explain what is needed.

We start with a conversation about your business. To assess your options, lenders commonly need identification and recent business bank statements. Depending on the loan, they may also request BAS, financials or statements for existing debts. Your broker gives you a clear list for your situation.

Often no deposit is required, particularly for established businesses buying standard assets from a dealer. A deposit is more likely where the business is new, the asset is older or specialised, the credit profile is weaker, or the amount is large relative to turnover. Deposits typically range from around 10% to 30% in those cases. Putting money in reduces the amount financed and can improve the terms offered, but it is not always necessary.

The common ones are an establishment or documentation fee charged at settlement, a monthly account-keeping fee, and a PPSR registration fee for recording the lender's interest in the asset. A brokerage fee may also apply, which we disclose to you in writing before anything is submitted. Some agreements include an early termination or break cost. Fees vary by lender and are typically a modest part of total cost compared with the interest, but they should still be compared.

Lenders publish maximum residual or balloon percentages that fall as the term lengthens, because the asset is worth less at the end of a longer term. For a vehicle, a common pattern is up to roughly 50% on a two-year term, reducing to around 20% to 30% on a five-year term. The ATO also sets minimum residual values for finance leases. A larger balloon lowers monthly repayments but increases total interest and leaves a lump sum to deal with at the end.

It is far less common than it once was. Under hire purchase the financier owns the asset and you hire it, with ownership transferring automatically after the final instalment. Since the GST changes that made chattel mortgage more attractive for businesses accounting on a cash basis, most equipment lending is written as a chattel mortgage or lease instead. Some lenders still offer commercial hire purchase, and your accountant can advise whether it suits your circumstances.

The Personal Property Securities Register is the national register of security interests in personal property, including vehicles and equipment. When a lender finances an asset, it registers its interest so the security is publicly recorded and its priority is protected if the asset is sold or the business fails. It also means a buyer searching the register will see the finance. The registration is released once the contract is paid out, and a small registration fee is usually passed on to you.